LKP Securities Sees 30% Upside in Auto Ancillaries Stock Amid Growing Demand, Buy

LKP Securities has assigned buy call to Auto Ancillaries sector stock, Jamna Auto Industries Ltd with a target price of Rs 140 apiece. If you buy Jamna Auto Industries now, you can get potential 30% return.

According to the brokerage, "Jamna Auto Industries (Jamna) is a beneficiary of the ongoing positivity in the CV cycle. Going forward, we expect CV demand to improve on favorable base, momentum in economic activities and government infra initiatives."

1. Jamna Auto Industries Stock Performance

The last trading price of the stock is Rs 108 apiece with an intraday gain of 0.69%. The stock's 52-week high is Rs 135 apiece and 52-week low is Rs 94 apiece, respectively. The company has a market capitalisation of Rs 4,333 crore.

2. Jamna Auto Industries Return

The stock has given multibagger returns to investors with last 5 returns at 69%. In the last 3-years, the stock has jumped 171%. It has declined 3% in last 1-year.

3. New Product Launches, New Markets To Provide Moat

Jamna has set up a target of achieving 50% of its product portfolio from new products and 50% from new markets including exports by FY27. It is heartening to see that the company is moving in that direction with 37% and 23% contribution from new products and new markets respectively.

On new products front, the company has launched a whole host of products such as Z-Spring, Stabilizer bar, Bus Air Suspension, Trailer Air Suspension etc along with the continued success of Parabolic Leaf Springs.

4. CV Cycle Uptick To Act As The Main Trigger

According to LKP Securities, "We believe the CV cycle which is going quite strong currently should continue its good run for next 1.5-2 years considering the momentum in the infrastructure and mining activities, construction projects and the overall investment capex boost in the country. Given this, Jamna and its products should gain solid demand."

5. Valuation

According to the analyst, "Considering sustained strong EBITDA margins performance, increase in value content per vehicle supported by new products launches in the suspension segment, lean fixed cost structure, anticipated higher share of after-market (which is non-cyclical), and strong balance sheet, we recommend a BUY on the stock with a target price of ₹140."

About The Company

Jamna Auto Industries (Jamna) is a manufacturer of suspension products (leaf & parabolic springs) for commercial vehicles (largely M&HCV space). It was established in 1965. Jamna has eight manufacturing plants in India, each in close proximity to CV OEMs, with installed capacity of ~3,00,000 metric tonnes and an overall market share >68%.

Domestically, the company has two main competitors in the form of Toyo Springs (~20% market share) and Soni Auto (~5% market share). Rest of the market is fragmented. Jamna has significant SOBs in Tata Motors (>70%) and Ashok Leyland (>90%).

Disclaimer

The stock has been picked from the brokerage report of LKP Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.